What is blockchain? A FAQ for the uninitiated

WTF is a Blockchain?

Ok, so you’ve come to this website in search of information about blockchain. For crying out loud, it seems like everything is just for tech geeks…and you’d be right.

But that’s why we are here, unicorn and all! We want to give you information in terms that anyone can understand, not just super computer nerds.

Bitcoin

So, blockchain. Since it’s such a new technology, there’s a chance it may not have consciously crossed your radar. Let’s take a different route:

Have you heard of Bitcoin?

If so, turns out you may have known about blockchain all along! If not, it’s ok! It’s an online currency that isn’t backed by a specific government, instead relying on a decentralized payment network. Bitcoin transactions are bundled up into “blocks” of information and recorded permanently in a distributed ledger. Each block contains the transaction information, as well as a timestamp, and connects to the previous block—hence the name: block-chain.

In more simple terms, any transactions that happen with Bitcoin (and blockchain) are documented in such a way that it cannot be changed once it has been recorded. So what does that mean? It basically comes down to the fact that once something is registered in a blockchain, the information is there for good.

History of Blockchain

Bitcoin, like other cryptocurrencies, is only a tiny piece of what blockchain can do. You may wonder,

If it can do so many darn things, why don’t I hear about it more?

Fabulous question, but let’s get a bit of history under our belts before we jump into that.

Keeping track of inventory and who owes what has been a struggle since the start of recorded history. The solution that ancient civilizations came up with is a method called double entry bookkeeping.

This system calls for two separate ledger’s maintained by separate parties that keep track of all debits and credits. To say this method has caught on is a massive understatement. This has been the underpinning of our financial systems ever since and we’re talking thousands of years. Our whole banking system is built upon this principle with only the bank and you having access to your record of transactions.

The concept of encrypted, secure chains containing blocks of information has been around since the ‘90s. It didn’t come to fruition, though, until 2008. In response to the 2008 financial crisis a new technology was outlined, and it would later become known as blockchain.

Blockchain’s underlying technology was originally written into Bitcoin’s code. Once Bitcoin was introduced, it became clear this newfangled thing was much more than just for money. For a number of years, Bitcoin was the main use of the technology, and other online currencies have since followed suit, including Dogecoin, Namecoin, Litecoin.

Now it seems that even industries see its potential, such as the financial and healthcare fields.

So what is it?

Blockchain is a decentralized ledger that reports all transactions yet is view-able by the public. The transaction is permanently recorded to the blockchain and cannot be changed by anybody.

This essentially created an extra digital ledger distributed to anyone who wants to view these transactions. This creates a level of accountability as most ledger’s would have to be changed in order for that become the truth on the blockchain.

The name blockchain largely refers to the structure of the technology. Blocks contain data that represents these transactions and when a block is mined or created, all the data contained in the block becomes canon and is added to the chain. Permanently. All ledgers are updated to recognize this new consensus. Blocks are then linked together to form a chain and can be referred back to at any time. (Hence, block-chain.)

Ethereum & Smart Contracts

How did blockchain make the original jump from cryptocurrency to full-fledged technology?

The realization that Bitcoin could be more than money ultimately lead to the creation of Ethereum, a second-generation blockchain system. It was built on the concept of taking contracts and making them “smart contracts.” Instead of only allowing cryptocurrency to change hands, Ethereum rests on the idea that other things may be placed onto the blockchain.

These smart contracts can be implemented in wide-reaching ways across many industries. The financial industry, for example, is poised to carry out the implementation of blockchain this year. Many healthcare companies are opting into these smart contracts, in order to up security for patient information. To answer the original question, blockchain, and subsequently cryptocurrency and smart contracts, are already being used at this very moment in every day life. Once you open your eyes and ears, you’ll realize how frequently you run into the technology.

Blockchain and You

Okay, well, cool I suppose. Sounds like a lot of big companies and industries are going to use the technology. That’s awesome and all, but…

Why in the world should I care about blockchain?

Another fantastic question, my friend. Since we’ve taken a look at the industry/big business side of things, let’s jump into why and how blockchain can affect a single person.

If you’re a Facebook user, have a Gmail account, or have ever Googled something, blockchain can directly impact your life. Every single time you log onto Facebook and like a picture, write on someone’s wall, or share an interesting post, the social media platform records your moves. It tracks this information so closely, it has the ability to predict things about you with eerie accuracy. Thanks to its 1.1 Billion+ users, Facebook has a lot of information about a lot of people across the globe. With that much data at its fingertips, it begs yet another question:

What the heck do they do with all of my data?

Sell it. Let me reiterate. They sell it.

Your information is bundled up with millions of other users and sold to companies, in order to target you in a more personal manner. When you receive information that’s tailored specifically towards your likes, you are more likely to complete whatever action these companies may ask of you. These actions may include signing up for a newsletter, subscribing to a social media channel, or making a purchase. Actions come in many forms, but really come down to what the company is trying to influence you to do.

What Can I Do to Stop This?

Jeez Louise, that’s awful! How can I stop this?

And this may come as no shock to you, but blockchain is the answer to your personal identity woes. It allows you to take back control of your online persona—your identity on the Internet. With every passing day, more blockchain or Ethereum-based applications are popping up to help solve this issue. These applications are specifically referred to as Dapps (pronounced “dee-apps”, like “email”). In order to earn the title of “Dapp,” it must exist on the blockchain, be open-source (no single entity controls it), and fulfill a few other requirements.

Because the way a blockchain is created—as a distributed ledger—many points connect over a network. As previously mentioned, this is referred to as a decentralized, or peer-to-peer (P2P) network (read more about decentralization here). If someone wants to hack the network, he must get into all of these connected points at the same time. The chances of this are extremely low, which really illustrates the security surrounding blockchain technology. Once you’ve stored your personal information on the blockchain, you’ll be well on your way to regaining control of your identity.

Fidelity Investment is one of the largest asset management firms in the world. And they’ve shown affection for blockchain and crypto before. Now they are taking it a step further, and making some real progress in their business on the blockchain.